Technology Development Agreement

EXHIBIT 10.17

[REDACTED VERSION]





DEVELOPMENT AND MANAGEMENT AGREEMENT



This DEVELOPMENT AGREEMENT (the "Agreement") is effective as of August 24, 1998 (the "Effective Date"), by and between INFOSPACE, INC., a Delaware corporation, with its principal offices at 15375 90th Avenue, Redmond, Washington 98052 ("InfoSpace"), and AMERICA ONLINE, INC., a Delaware corporation, with its principal offices at 22000 AOL Way, Dulles, Virginia 20166 ("AOL") (each individually a "Party" and together the "Parties").





WHEREAS, AOL owns, licenses, operates and distributes online and interactive information, communications, and transaction services, through the America Online(R) brand service and other services;



WHEREAS, InfoSpace has developed and operates certain electronic classifieds software and services; and



WHEREAS, AOL and InfoSpace desire to enter into an arrangement under which InfoSpace will provide to AOL customized classifieds software, tools and services.



NOW, THEREFORE, in consideration of the promises, terms and conditions contained herein, and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged by the parties InfoSpace and AOL agree as follows:





1. DEFINITIONS



Any defined terms not otherwise defined herein shall have the following meanings:



1.1 An "Affiliate" of an entity shall mean any entity which, directly or indirectly, is controlled by, controls or is under common control with such entity (with control meaning ownership of 50 percent or more of an entity and/or otherwise having effective control of an entity).



1.2 "AOL Classifieds" shall mean the AOL classifieds service to be developed by InfoSpace hereunder, as such classifieds may be updated or modified pursuant to the terms of this Agreement.



"[*]" = omitted, confidential material, which material has been separately filed with the Securities and Exchange Commission pursuant to a request for confidential treatment.





1.3 "AOL Network" shall mean (i) The AOL Service, (ii) AOL.com and (iii) any other product or service owned, operated, distributed or authorized to be distributed by or through AOL, its affiliates and/or partners worldwide (including without limitation those properties excluded from the definitions of the AOL Service).



1.4 "AOL Property" means any and all software, tools, technology, documentation or other materials provided by AOL to InfoSpace in connection with this Agreement or in which AOL had ownership rights prior to the Effective Date, or any other element of the AOL Classifieds in which AOL has ownership as may be expressly provided under this Agreement (including without limitation the Proofing Tool).



1.5 "AOL Service" shall mean the U.S. version of the America Online brand service.



1.6 "AOL User" shall mean any person or entity that enters the AOL Classifieds.



1.7 "Custom Development Deliverable" means any software (object code version), tool or other technology or materials developed by InfoSpace and delivered to AOL pursuant to Section 2.5.



1.8 "Delivery Schedule" shall mean the delivery schedule for the AOL Classifieds set forth in Exhibit A.



1.9 "Direct Costs" shall mean the reasonable direct costs of InfoSpace which shall not include any allocation of overhead, technology and software licensing costs or other third party costs, or hardware costs; provided that in the event that any Custom Development directed by AOL requires InfoSpace to obtain technology, software licenses or other third party resources which will not be used for any other purpose, the direct cost of such licenses or other third party resources (greater than $[*] in each instance and as reasonably approved by AOL) will be included in as Direct Costs hereunder.



1.10 "InfoSpace Site" shall mean any interactive site owned, controlled or operated by InfoSpace or to which InfoSpace provides significant technology, including without limitation InfoSpace cobranded sites and sites that make use of InfoSpace classifieds and related technology; provided that test sites which are not yet accessible by the general public (or alternatively not yet accessible by a significant portion of the end audience for which the site is intended, as applicable) shall not be included as an "InfoSpace Site" hereunder.



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1.11 "Licensed Products" shall mean any InfoSpace property or other property supplied by InfoSpace which is incorporated into the AOL Classifieds or otherwise supplied to AOL under this Agreement.



1.12 "Listings Revenue" shall mean that portion of any fees paid to AOL (i) by individuals who post listings in the AOL Classifieds and (ii) by commercial listings providers in respect of commercial listings in the AOL Classifieds which are attributable to such commercial listings, each net of any taxes (excluding income taxes), refunds, bad debt, third party sales commissions and third party billing costs.



1.13 "Proofing Tool" shall have the meaning assigned to that term in Section 2.9.



1.14 "Specifications" shall mean all the specifications for the AOL Classifieds set forth in Exhibit A, or as may be revised pursuant to Section 2.4.



2. DEVELOPMENT



2.1 Development. InfoSpace shall develop and deliver to AOL the AOL Classifieds in accordance with the Specifications and the Delivery Schedule. Delivery of the AOL Classifieds shall be deemed to occur when the AOL Classifieds is made available by InfoSpace to AOL for testing according to Section 2.2. InfoSpace shall provide AOL with at least weekly reports of its progress in the development of the AOL Classifieds which shall include without limitation regular consultation and reporting to AOL technical staff.



2.2 Testing. The AOL Classifieds will be subject to acceptance by AOL on satisfaction of such tests as AOL will reasonably construct in order to determine whether such product operates in accordance with the Specifications. Prior to any delivery to AOL of the AOL Classifieds, InfoSpace shall (i) test the AOL Classifieds in accordance with standard diagnostic practices to test its conformity to the Specifications, (ii) work with AOL personnel to achieve smooth integration of the AOL Classifieds into the AOL Service, AOL.com and other designated portions of the AOL Network and (iii) provide any assistance to AOL personnel reasonably necessary for such integration.



2.3 Acceptance. AOL will complete testing of the AOL Classifieds delivered by InfoSpace within 30 days of such delivery and if AOL does not notify InfoSpace in writing of any deficiencies within such period, the AOL Classifieds will be deemed accepted by AOL. In the event that AOL finds that the AOL Classifieds delivered by InfoSpace does not conform to the Specifications, AOL will notify InfoSpace and InfoSpace will correct such deficiency and re-deliver the AOL Classified to AOL within 10 business days of receiving such notice or as otherwise reasonably requested which product shall then be subject to the same testing procedure outlined above. Such process will be repeated until the AOL Classifieds has been accepted by AOL in accordance with



this Section 2.3. In the event that AOL determines to accept the AOL Classifieds hereunder notwithstanding the fact that the product does not meet certain of the Specifications, InfoSpace will not be considered in breach of this Agreement as a result of such deficiency, however, InfoSpace will remain subject to any reservation of rights by AOL in respect of such deficiency in its written notice of acceptance.



2.4 Change Requests. AOL may, from time to time prior to delivery of the AOL Classifieds, adjust the Specifications (consisting of additions, modifications, deletions or other revisions) consistent with the purpose and general functionality of the AOL Classifieds and/or in response to programming requirements or developments in the market. Each such change must be reflected in a written document signed by AOL that includes a detailed description of the specific change, along with any modified specifications. In addition, (i) in the event that any such change directed by AOL entails a significant change to the character of the development work necessary to meet the Specifications, the Parties will agree on a reasonable revision to the Delivery Schedule if necessary; and (ii) if in addition to constituting a significant change as outlined in (i) above, such change entails material (greater than $[*] in each instance) additional Direct Costs to InfoSpace, AOL will reimburse InfoSpace for its additional reasonable Direct Costs for implementing such change.



2.5 Custom Development Services.



(i) In addition to development of the AOL Classifieds in accordance

with the Specifications, AOL may from time to time request modifications

and enhancements to the AOL Classifieds (a) which are not part of

InfoSpace's ongoing management duties with regard to the AOL Classifieds as

outlined in Section 3 below, (b) which involve material additional effort

and Direct Cost (greater than $[*] in each instance) to InfoSpace, and (c)

the results of which are not deployed on any InfoSpace Site or other non-

AOL Network site (development services falling under the above description

referred to as "Requested Services"). Where it would otherwise have

sufficient rights to use the resulting Custom Development Deliverable other

than on the AOL Classifieds, InfoSpace will have the right to decide

whether to undertake such Requested Services at no charge to AOL, in which

case the resulting Custom Development Deliverable will be non-exclusive to

AOL ("Non-Exclusive Development Services"), or to undertake such Requested

Services as "Custom Development Services," in which case the resulting

Custom Development Deliverable will be exclusive to the AOL Classifieds

(and any other property designated by AOL).



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(ii) AOL will consult with InfoSpace regarding the structure and

implementation of, and the parties will agree on reasonable development and

delivery schedules for, any Requested Services (provided however, that

InfoSpace will use best efforts to give priority to Requested Services

hereunder). Requested Services will be subject to the same delivery (based

on the agreed upon delivery schedule for such development) and testing

requirements as are required for initial delivery of the AOL Classifieds

under Sections 2.2 and 2.3 above.



(iii) InfoSpace may use third parties in performing Requested

Services, provided that any such third party will be subject to AOL's

approval and InfoSpace will remain responsible for such services and any

resulting Custom Development Deliverables.



(iv) In the event that InfoSpace wishes, at any point after making an

original designation of Requested Services as Custom Development Services,

to treat such Custom Development Services hereunder as Non-Exclusive

Development Services (for example, InfoSpace wishes to deploy a feature

developed exclusively for AOL on the Public InfoSpace Site or an

Interactive Site), InfoSpace may do so with AOL's approval which will not

be unreasonably withheld and subject to the refund provisions of Section

2.7 below.



2.6 Porting Services. AOL may request that InfoSpace perform services hereunder to port the AOL Classifieds to new AOL Network platforms (such services which otherwise meet the definition of Requested Services above, referred to as "Porting Services"). Porting Services will be subject to the same delivery (based on the agreed upon completion schedule for such porting) and testing requirements as are required for initial delivery of the AOL Classifieds under Sections 2.2 and 2.3 above



2.7 Development Costs. InfoSpace will bear all costs in connection with the development, Delivery and testing of the AOL Classifieds; provided, however, that (i) in the case of any Custom Development Services and Porting Services, AOL will pay InfoSpace's reasonable Direct Costs for such development and/or porting (provided that InfoSpace will use best efforts to minimize such costs) and (ii) AOL will pay the costs of AOL's testing of the AOL Classifieds, Custom Development Services and Porting Services unless such testing is a repeat testing resulting from at least two consecutive previous rejections by AOL as a result of testing failure in which case InfoSpace will pay the Direct Costs of AOL for further such testing in each instance in excess of [*] Dollars ($[*]). In the event that at any time after payment by AOL to InfoSpace for any Custom Development Services, whether during or after the Term, InfoSpace determines to treat such services as Non-Exclusive Development Services or InfoSpace otherwise provides



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or in any way integrates or uses the corresponding Custom Development Deliverables, or any upgrade or derivative work thereof, to or on any InfoSpace Site, InfoSpace will report such occurrence to AOL and refund to AOL the payment received from AOL for such services in connection with the relevant Custom Development Deliverable.



2.8 Cooperation and Review of Development Services. AOL will cooperate with InfoSpace and provide such assistance for the performance of the Custom Development Services as InfoSpace may reasonably request. Without limiting the generality of the foregoing, AOL will provide InfoSpace with access to such information and other assistance as InfoSpace may reasonably require in performance of the Custom Development Services.



2.9 Proofing Tool. InfoSpace will develop for use on the AOL Network a proofing tool as more specifically provided in the Specifications (the "Proofing Tool"). The development of such tool will be a work made for hire with all right, title and interest in the results of such development being in AOL (with payment for such tool as provided in Section 5.1(iii) below). The Proofing Tool will be subject to the delivery and acceptance testing requirements provided for the AOL Classifieds in general in this Section 2 above. During the term of the Agreement, InfoSpace will provide upgrades to the Proofing Tool so that it continues to take advantage of improvements in technology with respect to such tools. InfoSpace will apply the Proofing Tool to the AOL Classifieds, provided that at its request, AOL will have access to and use of the Proofing Tool for use in AOL's discretion.



3. MANAGEMENT



3.1 AOL Control. AOL will have full and ongoing final approval in its discretion of the design, layout, look and feel, content, advertising inventory, commerce inventory, user interface, functionalities and all other aspects of the AOL Classifieds. Without limiting the foregoing, AOL shall have the right (i) to approve any material alterations of the AOL Classifieds InfoSpace desires to make, (ii) to review any InfoSpace plans, reports, operations and technology (provided that AOL shall not have the right under this Section 3.1 to review or copy any source code) related to the AOL Classifieds, (iii) to control all third party advertising and sales relationships with commercial and individual listings sources to the AOL Classifieds. AOL will have no obligation to launch, carry or promote the AOL Classifieds on the AOL Network. Without limiting the generality of the foregoing, InfoSpace will regularly report to AOL technical staff regarding all development and implementation relating to the AOL Classifieds and will provide no less than two weeks advance notice to AOL of any material change in AOL Classifieds technology (including without limitation any changes in HTML technology) and will cooperate with AOL during such two week period so that AOL may run QA testing prior to implementation of such changes; provided that (i) such notice and approval rights of AOL shall not prevent InfoSpace from implementing any





material change in technology on other InfoSpace Sites and (ii) unless AOL in its reasonable discretion determines otherwise, AOL will accommodate InfoSpace's reasonable requests to give expedited approval to any such material change.



3.2 InfoSpace Management. Subject to AOL's rights outlined in Section 3.1 above, InfoSpace will operate and manage the AOL Classifieds in accordance with the Specifications and other direction provided by AOL, using high industry standards of workmanship and service, and according to the operating standards detailed in Exhibit B attached hereto ("Operating Standards"). Without limiting the generality of the foregoing, some specific duties of InfoSpace shall be:



(i) to produce, manage, update, and upgrade in a timely manner (and in no event later than updates and/or upgrades to any other InfoSpace Site with similar functionality and purpose to the AOL Classifieds) the user interface, content, technology, performance and functionality of the AOL Classifieds (consistent with AOL direction in such areas and the Operating Standards).



(ii) to import commercial listings from multiple providers into the AOL Classifieds subject to AOL requirements (as specified in writing to InfoSpace). InfoSpace will work directly with classified advertisers, aggregators, and sales forces (including Digital City) selected by AOL to upload, update, de-duplicate, track, insert, and delete commercial listings in a timely manner and subject to written operating guidelines provided by AOL to InfoSpace. InfoSpace will provide a bulk uploading process and file feed format for listings based on AOL specifications to commercial listing providers.



(iii) to provide robust member post capability, including customer service and administration tools, subject to AOL requirements (as specified in writing to InfoSpace). At AOL's option, InfoSpace will integrate, and if necessary modify, AOL sourced member post, customer service, and administration tools into the AOL Classifieds.



(iv) to integrate commercial and member posted listings into a unified AOL Classifieds database and track all relevant data regarding use of and activity in the AOL Classifieds (which data shall be owned by AOL and shall be maintained separately from any other InfoSpace database and information as provided herein).



(v) to develop and implement classified listing management processes and tools, subject to AOL requirements (as specified in writing to InfoSpace), including ad review, ad editing, image handling and modification capabilities. InfoSpace will implement procedures to screen all ads and photos before they are placed into the AOL Classifieds in order to prevent the posting of classifieds content that does not comply with AOL's Terms of Service, Privacy Policy and any other written guidelines provided by AOL to InfoSpace.





(vi) unless otherwise indicated by AOL, to provide high quality customer service for the AOL Classifieds which will be compliant with AOL requirements (as specified in writing to InfoSpace).



(vii) to provide billing capabilities subject to AOL's billing requirements (as specified in writing to InfoSpace)[*].



(viii) to manage and update the AOL Classifieds user interface and design and make changes to the user interface and design at AOL's request.



(ix) to integrate additional features and functionality into the AOL Classifieds[*].



(x) to provide reporting to AOL on a regular basis on the operations and performance of the AOL Classifieds and on usage, data and other information obtained through the AOL Classifieds, including, to the extent reasonably possible, real time reporting through a web site. In addition InfoSpace shall report on (and supply any plans related to) any significant modifications it will make in the AOL Classifieds. The Parties will meet regularly to review InfoSpace management and product plans.



(xi) in the event that AOL reasonably determines that there are revenue opportunities from the use of the InfoSpace website scraper (as currently in use by InfoSpace and providing the ability to extract listings data from websites, referred to as the "WebSite Scraper"), or other tools in use by InfoSpace on any InfoSpace Site or which InfoSpace has licensed to any third parties, which AOL reasonably determines provide revenue opportunities in conjunction with the AOL Classifieds, InfoSpace will integrate theWebsite Scraper or such other tools for this purpose upon mutual agreement by the parties of the reasonable additional compensation to be paid to InfoSpace for the use of such tools in light of the revenue opportunities (provided that InfoSpace will not be required to integrate a tool licensed to a third party which is custom development for such third party and which is in use only by such third party).



3.3 Ongoing Modifications. In performing its management duties on the AOL Classifieds as oulined above, and without limiting the foregoing, InfoSpace will modify the AOL Classifieds to ensure that the AOL Classifieds remain competitive in the classifieds marketplace and takes advantage of new technologies, operating systems and other developments, to the extent relevant to the AOL Classifieds and technically feasible.



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3.4 Integration. InfoSpace will (i) provide AOL personnel with the ongoing documentation, training and instruction reasonably necessary to understand, use and evaluate (as necessary hereunder) the operation of the AOL Classifieds and the integration of the AOL Classifieds with AOL Network areas and services and (ii) license for AOL's use, or otherwise make available to AOL, web-based tools to facilitate management of dynamic programming, content, advertising and commerce links within the AOL Classifieds by non-technical AOL personnel. AOL agrees to reimburse InfoSpace for all reasonable Direct Costs incurred by InfoSpace in connection with any training and instruction rendered by InfoSpace pursuant to this Section 3.4 (including, without limitation, InfoSpace's reasonable traveling and lodging expenses).



3.5 Hosting.



(i) Except as provided otherwise in this Section 3.5 below, InfoSpace will host all of the AOL Classifieds [*]. AOL will have the right to review and reasonably approve InfoSpace's hosting operations and capabilities for the AOL Classifieds, including the hardware involved in such hosting.





(ii) AOL will have the option to host the AOL Classifieds at a location of its choosing if (a) performance of the AOL Classifieds is not industry standard in the classifieds industry as measured by security, uptime, speed and scalability or (b) the AOL Classifieds are otherwise not in conformance with the Operating Standards set out in Exhibit B. [*].



(iii) AOL may determine to host the AOL Classifieds in its discretion, other than for reasons provided for in Section 3.5(ii) above. [*]. Notwithstanding any provision of this Section 3.5(iii) to the contrary, in the event that within the first 30 days from the Effective Date AOL determines to host the AOL Classifieds pursuant to this Section (iii), by written notice to InfoSpace, AOL may open discussions regarding an alternate cost sharing arrangement between the Parties for such hosting. If the Parties cannot reasonably agree on such alternative cost sharing arrangement within two weeks of such notice, then AOL may terminate this Agreement in its discretion.



(iv) In the event that AOL determines to host the AOL Classifieds pursuant to this Section 3.5, InfoSpace will work with AOL to effect a quick and orderly hosting transition and, in the event that InfoSpace is not in material breach of this Agreement, AOL will make reasonable accommodation to InfoSpace in light of InfoSpace's contractual commitments in accomplishing a hosting transition hereunder (provided that InfoSpace will use best efforts to accomplish a quick and orderly transition



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and provided further that InfoSpace will not enter into arrangements preventing a quick and orderly transition).



3.6 Costs. Except where specifically provided otherwise, InfoSpace will bear all costs related to operating, managing and hosting the AOL Classifieds hereunder. Without limiting the foregoing, should AOL, in its discretion, determine that dedicated bandwidth is required to provide a reliable connection between AOL and InfoSpace for uploads and data transfers, InfoSpace will assume all related telecommunications costs for such dedicated bandwidth.



3.7 Domain. Notwithstanding anything herein to the contrary (and notwithstanding which party is hosting the AOL Classifieds pursuant to Section 3.5 above), all of the pages of the AOL Classifieds shall reside on the "aol.com" domain (or any other domain designated by AOL in its discretion)



4. OWNERSHIP AND LICENSE



4.1 InfoSpace Ownership. The Licensed Products and Custom Development Deliverables are licensed to AOL hereunder. Except for the license granted AOL in Section 4.2, InfoSpace reserves all right, title and interest to the Licensed Products and Custom Development Deliverables (including, without limitation, all intellectual and proprietary rights therein), including, without limitation, any upgrades, documentation and derivative works related thereto delivered to AOL under this Agreement. AOL agrees to assign any interest AOL has or may acquire (other than the license set forth in Section 4.2) in the Licensed Products and the Custom Development Deliverables to InfoSpace and otherwise reasonably assist InfoSpace, at InfoSpace's expense, in obtaining, securing, perfecting, maintaining, defending and enforcing for InfoSpace's benefit all rights with respect to the Licensed Products and the Custom Development Deliverables.



4.2 AOL Ownership. Title and rights of ownership to the AOL Property and any derivative works thereto, and all documentation related thereto created by either Party will be in AOL. Notwithstanding anything in this Agreement to the contrary, all right, title and interest in and to the look and feel and the user interface of the AOL Classifieds shall be part of the AOL Property hereunder. InfoSpace agrees to assign any interest in the AOL Property to AOL and otherwise reasonably assist AOL, at AOL's expense, in obtaining, securing, perfecting, maintaining, defending and enforcing for AOL's benefit all rights with respect to the AOL Property.



4.3 Licensed Product and Custom Development Deliverable License. InfoSpace hereby grants to AOL and any AOL Affiliates, a non-exclusive, worldwide, royalty free right to use, transmit, perform, display and otherwise utilize the Licensed Products, the Proofing Tool (to the extent that AOL does not otherwise have rights to any part of such tool under Section 2.9 above), and Custom Development Deliverables solely



in connection with the AOL Classifieds and consistent with this Agreement, provided that AOL shall also have the right to reproduce the Custom Development Deliverables and the Proofing Tool and to use such deliverables on the AOL Network outside of the AOL Classifieds. To the extent any software is licensed to AOL by InfoSpace under this Agreement, unless specifically provided otherwise, all such licenses shall be to software in object code form only.



4.4 AOL Pro ...